Select Committee on European Scrutiny Ninth Report



Draft General Budget of the European Communities for the year 2002.
Legal base: Article 272 EC; qualified majority voting; the special role of the European Parliament in relation to the adoption of the budget is set out in the Article
Department: HM Treasury
Basis of consideration: Minister's letters of 14 and 29 November 2001
Previous Committee Report: HC 152­iv (2001­02), paragraph 1 (7 November 2001)
Discussed in Council: 22 November 2001
Committee's assessment: Politically important
Committee's decision: Already cleared


  19.1  On 7 November 2001, we recommended for debate the 2002 Draft EC Budget. The debate was held on 19 November in time for the Budget Council on 22 November which considered any amendments made by the European Parliament in its first reading (25 October) and constituted the Council's second reading of the Draft Budget.

  19.2  When they are available, we will scrutinise the official texts and accompanying Explanatory Memoranda relating to the European Parliament's first reading and the Council's second reading. However, given that these documents may not be available for several weeks, we have decided, on the basis of two ministerial letters, to report substantively to the House on the progress of the Draft Budget.

The Minister's letters

  19.3  The Economic Secretary to the Treasury (Ruth Kelly) has sent two letters outlining recent developments. In her letter of 14 November, she provides information on three elements of the procedure. First, she outlines some of the amendments made by the European Parliament during its first reading of the Draft Budget on 25 October. As expected, the European Parliament increased both commitments (by _592 million) and payments (by _ 3,294 million) compared with the Council's Draft Budget. The Minister states that the position on payments taken by the European Parliament at its first reading was unacceptable.

  19.4  Secondly, the Minister provides information on the Letter of Amendment number 2 to the Commission's Preliminary Draft Budget. This Letter of Amendment sets out the latest position on CAP spending, the use of the flexibility instrument in category 2 for fishing fleet restructuring, and a reduction in appropriations for international fisheries agreements in category 4. The Letter of Amendment also includes an estimate of the surplus for 2001.

  19.5  Thirdly, the Minister sets out the Government's key objective for the November Budget Council, namely that there be sufficient budgetary provision to deal with post-11 September events, including aid to Afghanistan and its neighbours through the use of humanitarian aid lines, the Asia programme and TACIS. She states that it is also important to be able to mobilise additional resources by various means, such as use of transfers, the margin in Category 4 spending, a flexibility instrument and emergency aid reserve. She says that her view on the use of the flexibility instrument in category 2 would depend upon the assessment concerning additional funds for Afghanistan and its neighbours.

  19.6  In her letter of 29 November, the Minister informs us of the outcome of the Budget Council on 21­22 November at which the Council had its second reading of the 2002 draft budget. She reports that, as a result of conciliation with the European Parliament, an additional _171 million was earmarked for Afghanistan and its neighbours compared with the July Draft Budget. She says that the funding will be provided via _60 million in the Asia programme, _6 million in TACIS, _70 million from an unallocated margin within the category and at least _35 million from the emergency aid reserve. As a result, the spending is to be financed by lower margins (Category 4), _80 million from the fisheries agreement as a result of not signing a new agreement with Morocco, and a _5 million cut in the CFSP budget. The Minister also notes that approval was given:

  • to make reductions in agricultural spending which have contributed to providing a margin below the agricultural ceiling of _2.3 billion, which is ample to deal with any further needs in relation to foot and mouth disease;

  • for the use of a flexibility instrument to provide _170 million for a fleet restructuring programme for Spanish and Portuguese fishing vessels;

  • to provide _30 million for EU regions bordering candidate countries;

  • to limit the growth in payments in the 2002 budget to 2% compared with 2001; and

  • to include _1.2 billion of projected 2001 surplus as revenue in the 2002 budget.

  19.7  It is expected that the European Parliament will have its second reading on 10 December, with formal adoption of the 2002 EC Budget on 13 December.


  19.8  Official documents on the subsequent stages of EC budgetary procedure are unlikely to be available for some time. Meanwhile, we thought it worthwhile to provide this short report to the House before the budget's likely formal adoption on 13 December. We will report substantively on the relevant official texts when they are available.

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Prepared 18 December 2001